He
said after retentions that would see farmers being paid between $4.25
and $4.30 a kilo. That would be the lowest payout in 13 years

The
co-operative said there was still a global surplus of dairy products
and two of the biggest consumers, China and Russia, had cut their
buying.

"This
further reduction in the forecast farm-gate milk price is the last
thing farmers want to hear in what is proving to be a very
challenging season," Mr Wilson said.

He
said the latest forecast cut would knock about $400 million from
farmers' incomes this season.

Chief
executive Theo Spierings said the global imbalance was expected to
continue for longer than previously expected and that would weigh on
earnings for some time.

"Our
forecast is based on no significant changes to either supply or
demand globally before the end of the year. However, a reduction in
the supply available for export before then could mean prices recover
earlier than currently expected," he said.

The
New Zealand dollar, which is often sensitive to dairy prices, fell
around 0.25 US cents after the announcement, and was also weaker
against most other major currencies.

Westpac
economist Michael Gordon said he thought the chances of another cut
to the payout forecast this season were slim but the latest blow
would further dent business confidence.

He
said it would also add pressure on the Reserve Bank to cut interest
rates to cushion the economy.